Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. The first release, the advance, provides an early estimate of durable goods orders. About two weeks later, more complete and revised data are available in the factory orders report. The data for the previous month are usually revised a second time upon the release of the new month's data. (Bureau of the Census, U.S. Department of Commerce) Why Investors Care
| Released on 10/25/07 For Sep 2007 | ||||||||||||
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Highlights
The manufacturing sector appears to be on the slowdown, at least on the risk of a slowdown based on monthly durable goods data that will weigh on the side of a rate cut at the month-end FOMC. Durable goods orders fell 1.7 percent in September which follows a 5.3 percent decline in August. Orders did jump 5.9 percent in July, but July was before the troubles of August. It's the economy's performance after the credit-market seizure that is the main focus. Shipments also fell for a second straight month while inventories popped higher, all indications of slowing.
But September's weakness was centered in defense orders, excluding which orders rose 0.7 percent in the month, though the gain follows a steep 6.2 percent dip in August. September's rise excluding defense is an important offset, but still many of the numbers in the report show softness. Orders and shipments for defense aircraft and defense capital goods were both lower in September. Orders excluding transportation showed a moderate 0.3 percent gain but follow a 1.8 percent decrease the month before. Motor vehicles showed sizable declines in both orders and shipments for a second straight month. Orders for commercial aircraft fell nearly 10 percent in the month though shipments rose nearly 20 percent.
Shipments for non-defense capital goods, an indication of business investment, rose 0.2 percent. Orders for machinery were especially strong, another sign of business investment. These results follow a surprising jump in ISM capital leadtimes for September, in fact the largest jump on record that suggested manufacturers were increasing investment at a time of slowdown.
But demand for capital goods isn't likely to be enough to offset the slowdown in other sectors. This report will likely firm expectations for very mild readings, barely above 50, in next Thursday's ISM report on manufacturing. Treasury yields fell and the dollar eased in reaction to today's data. The effect on the stock market, given the offsetting play between slowing growth and lower interest rates, is likely to be mixed.
Durable goods orders posted a sharp 4.9 percent drop in August, following a 5.9 percent surge in July. Aircraft orders have been even a little more volatile than usual, pulling down August orders. Nonetheless, excluding the volatile transportation component, new orders dipped 1.8 percent in August, following a 3.3 percent jump the month before. It is not unusual to have a partial reversal of a strong month with a decline the next month. That is the nature of the durable goods orders series. However, the Fed and the equity markets still would prefer to see moderate improvement in new orders to confirm that manufacturing is not softening too much.
New orders for durable goods Consensus Forecast for September 07: +1.8 percent
Range: -0.1 percent to +3.0 percent
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Monthly fluctuations in durable goods orders are frequent and large and skew the underlying trend in the data. In fact, even the yearly change must be viewed carefully because of the volatility in this series. |
| 2007 Release Schedule | ||||||||||||||||||||||||||
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